Speaker 1: You're listening to AC N A podcast.
Speaker 2: Hey, it's me, your Money Talks host, Andrea Heng. Now,
Speaker 2: before I get into today's episode, I just wanted to
Speaker 2: say a big thank you to everyone who has been
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Speaker 2: We've been getting some of your questions, we see them. Ok?
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Speaker 2: actually know what you want to learn about personal finance
Speaker 2: and then we can get the right guests to teach you.
Speaker 2: All right. So let's get started with some quick headlines
Speaker 2: that may help you make better financial decisions today.
Speaker 2: I have my editor with me, Tiffany Ang in the studio. Hey, Andrea. Hi. Ok.
Speaker 2: First up, did you see the news last week? That
Speaker 2: a five room H DB flat in to payoh broke
Speaker 2: record
Speaker 2: and sold for more than 1.5 million Singapore dollars. This
Speaker 2: is as big as my eyes can go. It is
Speaker 2: quite it is quite big. I was shocked when I
Speaker 2: saw the headline, I mean, we're not, we're not strangers
Speaker 2: to million dollar H DB flats. But this is really
Speaker 2: taking the cake 1.5 million. Yeah, it's the price of
Speaker 2: a condominium. Really? Exactly.
Speaker 2: But of course, these are the rare cases. The strongest
Speaker 2: demand is still for four room flats. Housing experts are
Speaker 2: saying that young families are pushing up the prices of
Speaker 2: four room HDB flats by up to 35% over the
Speaker 2: last five years. You know what if that kind of
Speaker 2: makes sense? I think the appeal of three room flats
Speaker 2: for young couples. I think it just doesn't make sense
Speaker 2: anymore in terms of paying lease. And also, yeah, the size,
Speaker 2: you know, so the four room flats, I mean, these
Speaker 2: are probably
Speaker 2: part of a popular category for growing families because you know,
Speaker 2: to buy a five room flat, it may actually bust
Speaker 2: their budget, it may actually even be too big and
Speaker 2: they don't want to have to wait for a BT
Speaker 2: O flat and that, you know, we can take up
Speaker 2: to 4 to 5 years to build, correct, let alone
Speaker 2: waiting for the keys. The Renault add to that. It's
Speaker 2: I know before you know, it's 67 years. Right? And
Speaker 2: three kids later. Exactly. So one can only hope that
Speaker 2: these prices don't soar to record levels with this growing
Speaker 2: fingers crossed, fingers crossed. Well, speaking of property big news
Speaker 2: this week for China real estate watchers. Yeah, Hong Kong
Speaker 2: court has ordered the liquidation of China Evergrande Group. So Evergrande,
Speaker 2: if you didn't know has more than $300 billion of
Speaker 2: total liabilities, that's a lot of money. Well, it sent
Speaker 2: the struggling property sector in China into a tail spin
Speaker 2: when it defaulted on its debt in 2021. This ever
Speaker 2: Grand saga is a never
Speaker 2: story. I mean, China's property market really hasn't been looking
Speaker 2: very good and its stock market. Well, it has been
Speaker 2: wallowing near five year low. So all eyes are now
Speaker 2: on what the government is going to do next to
Speaker 2: rejuvenate growth in the ailing Chinese economy. And this ever
Speaker 2: grow saga. I think it's just making it worse. This
Speaker 2: is also a good time to remind everyone of the
Speaker 2: risks of investing in some sectors and for some investors
Speaker 2: to perhaps even re look at your portfolio.
Speaker 2: So perhaps in this climate, adjust your exposure to China
Speaker 2: according to your risk profile. Yeah, that's some good advice.
Speaker 2: But you know what, it's not all doom and gloom.
Speaker 2: Have a listen to an episode that we did last
Speaker 2: year when China was reopening after COVID-19, we did talk
Speaker 2: about some possible growth sectors in the country. Just search
Speaker 2: for as China reopens for business. Is it time to
Speaker 2: invest in China's stocks? Remember always do your homework, find
Speaker 2: the right professional advice and you'll be on your way.
Speaker 2: So every other year my mom asks to go shopping
Speaker 2: for gold. I don't know about you. But when I
Speaker 2: was younger, I didn't understand the significance of this. Like,
Speaker 2: why was it so important to hoard gold after all?
Speaker 2: I'm a really simple G OK. When it comes to jewelry,
Speaker 2: just one pair of earrings, one bracelet. That's it. I
Speaker 2: don't need more. But then I got older and then
Speaker 2: I started to understand,
Speaker 2: I admit this is a very simplistic way of looking
Speaker 2: at investing in gold as a rainy day asset. But
Speaker 2: putting your money in safe havens have long been a
Speaker 2: go to for many people. Gold are the precious metals,
Speaker 2: some currencies, some defensive stocks. These are traditional safe havens.
Speaker 2: But
Speaker 2: do they really come with zero risks? That's what this
Speaker 2: episode is. Hopefully going to answer with assistance from Vasu Menon,
Speaker 2: managing director for investment strategy at OCBC. Welcome to the
Speaker 2: money talks about K. Thank you very much. Thanks for
Speaker 2: having me. Good to have you on the show. Let's
Speaker 2: start with gold. What I started with just now, right?
Speaker 2: So tell me, Vasu has my mom
Speaker 2: and pretty much all moms been doing the right thing,
Speaker 2: buying stacks of gold jewelry over the years when prices
Speaker 2: were favorable. Well, you know, I think it makes sense
Speaker 2: for people to buy gold. Absolutely makes sense. Just to
Speaker 2: put things in perspective, the supply of gold in the
Speaker 2: world is limited to 3.5 Olympic size swimming pools. And
Speaker 2: that's not a, that's not a lot. Exactly. So there's
Speaker 2: a very limited supply of gold worldwide. On the other hand,
Speaker 2: demand for gold has increased quite a lot
Speaker 2: in the last few years. Ok. Put aside individuals, just
Speaker 2: look at central banks, central banks have been trying to
Speaker 2: diversify their holdings of assets away from the US dollar,
Speaker 2: which something will depreciate over time towards other assets as well.
Speaker 2: And one of the assets they've been buying in quite
Speaker 2: a significant amount has been gold. In fact, the purchase
Speaker 2: of gold in 2022 hit a record high.
Speaker 2: And in the first nine months of last year, you
Speaker 2: had 800 tons of gold being bought and that's a 14%
Speaker 2: increase over the same period in 2023. So probably we
Speaker 2: had another record deal of purchases of gold from institutions
Speaker 2: in 2023. So that's the institutional side of things, not
Speaker 2: just central banks pension funds and but from the individual perspective,
Speaker 2: there's a greater way
Speaker 2: towards the benefits of gold. Why is gold appealing? Right.
Speaker 2: Number one, I think gold offers you what they call
Speaker 2: zero carry or zero yield. You don't get dividend yield
Speaker 2: from gold like you do when you buy stocks or bonds, right?
Speaker 2: So when interest rates come down, which are likely to
Speaker 2: happen in the next 2 to 3 years, that will
Speaker 2: enhance the appeal of gold because it's all relative, right?
Speaker 2: And I think the other factor that also August. Well,
Speaker 2: for
Speaker 2: goal is the fact that if central banks cut interest rates,
Speaker 2: which look likely in the next 2 to 3 years,
Speaker 2: the US dollar is likely to weaken, goal is priced
Speaker 2: in US dollars. And that makes goal more attractive, affordable.
Speaker 2: And again, that spurs demand for gold. So cheaper dollar
Speaker 2: equals cheaper, go cheaper dollar equals cheaper goal and therefore
Speaker 2: a greater demand for gold. And of course, the third
Speaker 2: factor is the world we're living in is a highly
Speaker 2: uncertain place, both from a political standpoint, as well as
Speaker 2: economic standpoint. And I've been in the industry, you know,
Speaker 2: looking at investment markets for the last more than 34 years.
Speaker 2: And I can tell you that I've never seen so
Speaker 2: many moving parts at one time. So you've got crazy. Yeah,
Speaker 2: so it's crazy. We've got so much happening around the world,
Speaker 2: so many moving parts. And so again, investors are looking
Speaker 2: for something
Speaker 2: where the value they believe will hold in the long
Speaker 2: term gold is limited in supply. So you know, individuals
Speaker 2: as well buying gold because there's a greater awareness about
Speaker 2: the fact that gold is a safe haven, as you said,
Speaker 2: offers you some protection in the event of uncertainty, think
Speaker 2: of gold as an insurance policy right? Within your portfolio,
Speaker 2: you want to have some insurance, some exposure to something
Speaker 2: that gives you some degree of protect,
Speaker 2: right? And not everything is thrown into highly risky assets, right?
Speaker 2: So treat gold as an insurance policy. Have some of it,
Speaker 2: but don't over investigate. Right. Ok. That's a good point. Actually.
Speaker 2: Think of it as just a cover. That's really rightfully right.
Speaker 2: You said we keep hearing about gold and how resilient
Speaker 2: it is as a commodity. And as you said, the
Speaker 2: US dollar is weakening. So gold is something that thrives
Speaker 2: in financial instability.
Speaker 2: Those rate cuts weaker economic performances expected in 2024 geopolitics,
Speaker 2: as you said, also all a combination for a year
Speaker 2: of uncertainty. What's the reason for the resilience of goal
Speaker 2: compared to say silver, for example? Well, again, goal is
Speaker 2: something that has a higher profile. Silver is also linked
Speaker 2: to how economies do. It's sometimes deemed as an industrial
Speaker 2: metal. And so if the global economy slow down, then
Speaker 2: the demand for silver can also slow down for industrial use, right?
Speaker 2: So the outlook for silver is less clear compared to go,
Speaker 2: go on. The other hand, usually does not have any
Speaker 2: industrial application less tight to the economic cycle. Understood. So,
Speaker 2: but if you look at 2023 although stock markets and
Speaker 2: bond markets ended the year on a higher note, if
Speaker 2: you had a chart
Speaker 2: of the stock and bond markets in 2023 what is
Speaker 2: a roller coaster ride? It's like being in universal studio
Speaker 2: taking the roller coaster ride, right? It wasn't a smooth
Speaker 2: ride and that's the kind of environment that gold typically
Speaker 2: tends to do well in. Right. And that's exactly what
Speaker 2: happened last year. So it really just boils down to
Speaker 2: the profile of gold. That's just how gold behaves. Exactly.
Speaker 2: That's the way go behaves. It tends to do well
Speaker 2: when you have lots of volatility and uncertainty. But
Speaker 2: the other factor that benefited goal, especially towards the end
Speaker 2: of last year is the very sharp decline in us
Speaker 2: bond yields, right? So the market started taking a view
Speaker 2: that central banks are going to turn Dovish. They're going
Speaker 2: to pivot in 2024 they're going to cut rates. And
Speaker 2: what we saw was as a consequence of that us
Speaker 2: 10 year bond yields came off from like
Speaker 2: 5% to below 4%. That's a very sharp decline of
Speaker 2: more than 1% in a matter of like two months
Speaker 2: or so. And that gave gold a big boost. No
Speaker 2: wonder we saw those spikes in gold prices towards the
Speaker 2: end of the year precisely. But on the other hand,
Speaker 2: if you look at 2022 when the fed started hiking
Speaker 2: rates sharply, guess what happened, go, coal prices fell 20%.
Speaker 2: So while we say it's a safe haven in reality,
Speaker 2: its price is also determined by factors that are not
Speaker 2: just linked to crisis and turmoil, but also sometimes economic fundamentals,
Speaker 2: especially interest rates because bear in mind goal offers you
Speaker 2: zero carry or zero yield. And therefore, when interest rates
Speaker 2: are going up,
Speaker 2: then there's less reason for investors to invest in gold
Speaker 2: when they can actually put their money into other asset
Speaker 2: classes like stocks and bonds that give them pretty good yield. Right?
Speaker 2: So it's not the tough cookie. We all thought it was.
Speaker 2: There is a vulnerability definitely, which is why you should
Speaker 2: not over invests in it. Treat it as a insurance policy, right?
Speaker 2: Treat it as a portfolio diversified, have some of it
Speaker 2: in a portfolio. Yeah, but not all of it don't
Speaker 2: go all in on it, of course. Ok. So let's
Speaker 2: come back to that concept of safe haven assets, right?
Speaker 2: How would you describe them,
Speaker 2: the value of safe assets typically tend to hold or
Speaker 2: appreciate during an economic downturn during an economic crisis, during
Speaker 2: a financial crisis, during periods of political upheaval and turmoil.
Speaker 2: So again, they offer you a backstop, they offer you
Speaker 2: some degree of protection in a portfolio in the event
Speaker 2: of severe uncertainty and crisis. So that's what safe havens are.
Speaker 2: They typically tend to hold up well, in terms of
Speaker 2: value and even appreciate during times of crisis.
Speaker 2: So when it comes to gold, it's a very low
Speaker 2: or no, almost no yield. So when it comes to
Speaker 2: the other safe havens, are we looking at some kind
Speaker 2: of yield? Would you say that these are must haves
Speaker 2: in your portfolio? You've got quite a number of safe
Speaker 2: haven assets out there? If you pick the currency
Speaker 2: market, for example, the Japanese Yen is typically seen as
Speaker 2: a safe haven asset. The Swiss franc is seen as
Speaker 2: a safe haven an asset. I think the Japanese Yen,
Speaker 2: for example, looks interesting right now because the Japanese government
Speaker 2: has adopted ultra loose monetary policy. While other central banks
Speaker 2: were hiking rates, they were,
Speaker 2: you know, adopting ultra, that's where I'm going for my
Speaker 2: holiday in March. Precisely. I think more than half of
Speaker 2: Singapore is probably in Japan last November, December, right? Because
Speaker 2: the yen is so weak but nothing stays down forever.
Speaker 2: So come 2425 inflation picks up in Japan and the
Speaker 2: Japanese economy is gaining traction, find stability that inspires confidence
Speaker 2: in the central bank to start hiking rates a bit
Speaker 2: gradually that we
Speaker 2: thing is going to drive the Japanese Yen higher. And
Speaker 2: of course, with so much happening this year, we got
Speaker 2: 40 national elections happening this year. It must be a record.
Speaker 2: It's a record, 40 national elections covering 40% of the
Speaker 2: world population. Of course, the big one, the big one,
Speaker 2: Andrea is the one at the end of this year
Speaker 2: with the US elections. And the big question is whether
Speaker 2: Trump is going to make a comeback in 2.0? People
Speaker 2: don't often
Speaker 2: I think that these things don't affect the markets. They
Speaker 2: actually do, they do impact the market quite significantly, you know,
Speaker 2: but for example, if Trump comes back it could mean
Speaker 2: a period of uncertainty volatility which is going to be
Speaker 2: good news for gold. So I think looking ahead this
Speaker 2: year goal and of course the Japanese Yen as well,
Speaker 2: not just go but other safe haven assets as well.
Speaker 2: So talking about the Japanese Yen, you know, if the
Speaker 2: central bank changes policy increases interest rates, that's going to
Speaker 2: be good for the yen. So we see the yen
Speaker 2: appreciating more than the Swiss Franc
Speaker 2: this year. Why is the Japanese Yen a safe haven currency?
Speaker 2: That was going to be my question. Yeah, that's right.
Speaker 2: You know, I mean, I saw that coming and I
Speaker 2: thought I better answer before you ask it. And you know,
Speaker 2: I think if you look at Japan, it is the
Speaker 2: largest creditor nation in the world. What does that mean?
Speaker 2: What that means is that they own more external assets
Speaker 2: then they owe. So if you take the amount of
Speaker 2: assets that the Japanese economy owns compared to what it owes,
Speaker 2: they own a lot more compared to what they owe.
Speaker 2: So lower debt and higher assets. That's right. So you
Speaker 2: think of it as when they invest in overseas markets,
Speaker 2: as assets, when they owe overseas markets, overseas investors money,
Speaker 2: that's liability, the assets minus liability, that amount comes up
Speaker 2: to more than $410 trillion right? That's a
Speaker 2: amount, right? So that to have in the pocket, nice
Speaker 2: to have in the pocket and that's the largest in
Speaker 2: the world. You know, so that provides the currency with
Speaker 2: some degree of backstop. Now, the other thing that works
Speaker 2: in favor of the currency is the fact that the
Speaker 2: Japanese economy enjoys what they call a current account surplus, right?
Speaker 2: And that gives you an idea of the balance in
Speaker 2: terms of trade and services between Japan and the rest
Speaker 2: of the world. And they've got a current account surplus. Again,
Speaker 2: typically that underpins
Speaker 2: the currency and Japan is now seeing a period of
Speaker 2: political stability generally, as I said, icing on the cake
Speaker 2: is that interest rates probably going to go up in
Speaker 2: Japan after being ultra loose, ultra low for many years,
Speaker 2: that's going to be the tail wind for the Japanese currency.
Speaker 2: So put all that together. Again, the Japanese currency is
Speaker 2: something to bear in mind. Of course, here in Singapore,
Speaker 2: investors have been gravitating towards safe havens like t bills,
Speaker 2: treasury bills, treasury bills, six months, 12 month treasury bills
Speaker 2: and putting money into Singapore savings bonds, those are probably
Speaker 2: less risky, less volatile, but you also don't enjoy a
Speaker 2: lot of capital upside from those things. With the Japanese Yen,
Speaker 2: you can actually enjoy capital upside if the Japanese currency
Speaker 2: appreciates or if gold appreciates but with T bills and
Speaker 2: with Singapore savings bonds, you don't enjoy the capital upside
Speaker 2: and what you're in it for is really just the yield. Right. Right. So,
Speaker 2: so different safe havens have different characteristics. If I may
Speaker 2: throw one more
Speaker 2: safe haven, you can even think of investment grade highly
Speaker 2: rated corporate bonds, right? As to some extent offering you
Speaker 2: safe passage as well. Ok. So for example, if you
Speaker 2: buy a bond and the bond says a 10 out
Speaker 2: of five years and it's a good bond, it's a
Speaker 2: good company with a very strong balance sheet, right? The
Speaker 2: possibility of default is quite low, right? So if you
Speaker 2: hold that bond till maturity, right, what happens is that
Speaker 2: you continue to clip the coupon or the yield on
Speaker 2: the bond
Speaker 2: and then on maturity, the the company doesn't go bust
Speaker 2: you get your money back. Ok. Right. So the key
Speaker 2: thing here is the company has to be of sound fundamentals,
Speaker 2: it doesn't go bust, you get your money back. So
Speaker 2: if you put your money into strong companies, very strong
Speaker 2: companies with strong balance sheets, what we call investment grade bonds, right,
Speaker 2: then you know, the good chance of you getting your
Speaker 2: money back at the end of the tenner. But of course,
Speaker 2: along the way,
Speaker 2: the price of these bonds may go up and down.
Speaker 2: But if you're holding it till the end, then you
Speaker 2: get your money back. Do they tend to be from
Speaker 2: specific sectors? Not necessarily, it is very company specific, you
Speaker 2: can go down to looking at the company and seeing
Speaker 2: whether you know it's got a very strong balance sheet,
Speaker 2: whether it's got a lot of cash in his books,
Speaker 2: whether it's got a low debt level or debt to
Speaker 2: equity ratio in his book, whether it's in a business
Speaker 2: that is relatively stable, able to send economic downturns. And
Speaker 2: there are companies like that out there. Now, the difference
Speaker 2: between buying a bond like this, say with a five
Speaker 2: year tender and buying a stock with over a five
Speaker 2: year horizon is that you can buy a stock at
Speaker 2: the dollar. But at the end of five years, it's
Speaker 2: possible the stock will be 60 cents and there's no
Speaker 2: light at the end of the tunnel because you don't
Speaker 2: know when the 60 cents is going to go back
Speaker 2: to up to the bond. At the end of that
Speaker 2: five year 10,
Speaker 2: you get your money back. So at least at least
Speaker 2: your money back and that contingent on the company staying afloat.
Speaker 2: So again, you can, in some ways, if you're prepared
Speaker 2: to whole tail maturity of a bond, then I think
Speaker 2: you can also see it to some degree as a safe,
Speaker 2: fascinating. I didn't think of corporate bonds as a safe
Speaker 2: haven asset, but I think it's something to watch for sure. Yeah,
Speaker 2: investment grade bonds. So, back to current CEO, so you
Speaker 2: talked pretty extensively about the Japanese Yen and we all
Speaker 2: know that it's a very attractive investment right now. What
Speaker 2: about
Speaker 2: the Swiss Franc? And I think in general, what I
Speaker 2: want to know is why do these currencies? The US
Speaker 2: D also is considered a safe haven investment. The Swiss franc,
Speaker 2: as you say, why are these safest currencies in the
Speaker 2: world to invest in in the first place for quite
Speaker 2: a number of reasons? Number one, in the case of
Speaker 2: the Swiss government, it's relatively stable. You have political stability
Speaker 2: in Switzerland, right. Number two, I think
Speaker 2: you have a Switzerland that is politically independent generally. So
Speaker 2: it is not plugged in to some extent in the
Speaker 2: global political turmoil. It stands on its own. It takes
Speaker 2: a stand that is neutral, independent. What about the Switzerland
Speaker 2: of Asia? Singapore? Well, you know, I mean, exactly, I
Speaker 2: was going to come to that, you know, eventually that's
Speaker 2: something that we sometimes see as a safe haven as well.
Speaker 2: So Singapore government bonds are pretty good safe haven in
Speaker 2: my view
Speaker 2: because, you know, the government has got solid balance sheet.
Speaker 2: We've got good political stability over here. So that's something
Speaker 2: to think about. And of course, you know, some people
Speaker 2: even see the Singapore stock market as a safe haven
Speaker 2: among other stock markets because you don't see the extreme
Speaker 2: volatility in the Singapore stock market that you see in
Speaker 2: other stock market. It's almost as if a boring day here.
Speaker 2: It's a boring market. But, you know, if you're happy
Speaker 2: with the yield that the market offers, you then, you know,
Speaker 2: I think, hey, it's a market that you want to
Speaker 2: have in your portfolio because
Speaker 2: it doesn't see the same kind of wild swings that
Speaker 2: you see out of Chinese equities. Hong Kong stock market,
Speaker 2: South Korean Taiwanese equities because it's a boring market, no doubt.
Speaker 2: But it offers you yield decent yield and relative stability again, relative.
Speaker 2: But of course, the Singapore stock market is not as
Speaker 2: safe as say a government bond, it does go up
Speaker 2: and down and as long as investors keep that in mind,
Speaker 2: then I think you can see that way. But in
Speaker 2: the case of Switzerland,
Speaker 2: you know, it's got a current account surplus like Japan,
Speaker 2: its banking system is sound and solid. And the thing
Speaker 2: about the US dollar Japanese Yen and Swiss Franc is
Speaker 2: they are all very liquid currencies. What does that mean?
Speaker 2: That means it's easy to buy and sell. They are
Speaker 2: widely traded in global markets. And that's important,
Speaker 2: Swiss Franc, even a Swiss Franc, it's a very popular currency,
Speaker 2: it's widely traded. And that's important because when you have
Speaker 2: pension funds and big fund managers buying these currencies, they
Speaker 2: don't buy in small amounts, they buy in billions. And
Speaker 2: when they sell, they also need to sell in billions
Speaker 2: and they need to have really buyers who are prepared
Speaker 2: to take it off their books. And I think because
Speaker 2: of that
Speaker 2: these currencies are more liquid, more tradable. And so therefore
Speaker 2: investors do see them as safe havens. The euro as
Speaker 2: well is quite tradable. I was about to ask. But
Speaker 2: the difference is in Europe, I think it's going through
Speaker 2: a difficult period right now. Politically, it is going through
Speaker 2: a difficult period. You don't have the political stability that
Speaker 2: you see in Europe compared to Japan Switzerland. And even
Speaker 2: to some extent in relative terms, the US.
Speaker 2: Yeah. Right. Because in the US, even if a president
Speaker 2: comes to power, he's checked by Congress, there's a check
Speaker 2: and balance in place. He doesn't have a plan check,
Speaker 2: a free hand. So he doesn't have a free play
Speaker 2: in Europe is different. You have the Ukraine war happening
Speaker 2: right now. You have populism on the rise. So you know,
Speaker 2: the investors don't see the Euro as a safe haven.
Speaker 2: Got it, got it. Ok. So how do I invest
Speaker 2: in currencies? And should I be hoarding
Speaker 2: the Japanese Yen, the Swiss franc in a multi currency account,
Speaker 2: for example. Well, there are various ways, I mean, what
Speaker 2: you just highlighted is one way to invest some of
Speaker 2: these currencies. Some would actually just go to the money
Speaker 2: changer and change money. That's another way to do it.
Speaker 2: I actually, you know, people do this. That's right. There
Speaker 2: are platforms that allow you to buy and sell currencies.
Speaker 2: So there are different ways. I think it's a matter
Speaker 2: of talking to advisor and finding out what you're comfortable
Speaker 2: with and what the costs involved are for each of
Speaker 2: these options. If I were to do it on my
Speaker 2: own without a
Speaker 2: financial advisor. What do I need to look out for?
Speaker 2: I think with currencies, you've got to be a bit
Speaker 2: more careful. Don't over invests in it because currency markets
Speaker 2: are volatile. Although the Japanese Yen is a safe haven.
Speaker 2: It doesn't mean that you won't see volatility in the
Speaker 2: Japanese currency. It is not boring. It is. Well, it's
Speaker 2: been on a downward trend which is why many of
Speaker 2: us in Japan exploring it is a travel destination. So
Speaker 2: it is not immune from volatility and downward drifts. So
Speaker 2: I think you want to keep your exposure
Speaker 2: to some of these currencies. Not significant minimal. Don't over
Speaker 2: invest in it. I think currency markets can be volatile
Speaker 2: although we're quite positive in the Japanese. All right. Fantastic. Ok.
Speaker 2: So I wanted to talk now about defensive stocks. So
Speaker 2: you spoke briefly about stocks bonds, certain investment grade bonds
Speaker 2: as well. I wanted to specifically talk about defensive stocks,
Speaker 2: right? And they're known to be among the safer investments
Speaker 2: to make. What exactly is a defensive stock, the characteristics
Speaker 2: of it, which sectors they tend to be in. And
Speaker 2: more importantly, why are they? I won't say safe but
Speaker 2: safer than other stocks. I think it's difficult to generalize
Speaker 2: in terms of sectors, but I think defensive
Speaker 2: stocks will be companies with strong balance sheets. Ok. When
Speaker 2: I mean, strong balance sheets, I mean, they've got to
Speaker 2: have a sizable amount of cash on their balance sheet
Speaker 2: they got very low levels of debt that makes them
Speaker 2: less vulnerable to economic downturns. Ideally, they have a strong
Speaker 2: market share in whatever industry they are in big market
Speaker 2: share in whatever industry they are in.
Speaker 2: And perhaps to some extent, they have some degree of
Speaker 2: following from global fund managers. In other words, they are,
Speaker 2: they are blue chips, they are big companies to some
Speaker 2: extent because they have a following and that provides you
Speaker 2: with some degree of support, buying support to the tight turn.
Speaker 2: So you put all that together. I think it makes
Speaker 2: for defensive stock. They can come from different sectors, come
Speaker 2: from the real estate sector, even
Speaker 2: they can come from the telecommunication sector, health care as well,
Speaker 2: health care as well. That's a fairly defensive industry. But again,
Speaker 2: you have to go down to the devil is in
Speaker 2: the details. You got to go and examine the balance
Speaker 2: sheets of this company. So it takes a bit of research, right?
Speaker 2: Don't just get drawn into healthcare because it's healthcare. You
Speaker 2: got to look at the company, it's involving as well.
Speaker 2: For example, if you're buying into a biotech company, that's
Speaker 2: in the healthcare space, that can be quite risky. Yeah,
Speaker 2: because there is some degree of innovation and risk, whatever
Speaker 2: they are
Speaker 2: venturing into may not bear fruit. And we've seen that
Speaker 2: during the pandemic or rather just coming out of the pandemic,
Speaker 2: there were pandemic darlings because they had to manufacture those vaccines.
Speaker 2: But when those vaccines were out,
Speaker 2: the share prices just started to fall. That's right. So
Speaker 2: you got to be careful as well. You want to
Speaker 2: buy companies where the business is steady state staple businesses,
Speaker 2: hopefully that will be needed in good times and bad times.
Speaker 2: So consumer staples some degree of health care again, depending
Speaker 2: on the individual. So a lot of factors go into.
Speaker 2: But I think the key thing is this, do your research,
Speaker 2: you got to learn how to read balance sheets. If
Speaker 2: not get the help from somebody, look at these companies carefully,
Speaker 2: talk to people. Don't be in a hurry to jump
Speaker 2: in
Speaker 2: head long. Do your research before you actually get into
Speaker 2: these companies. And I think a good practice is actually
Speaker 2: write down why you invested in the company based on
Speaker 2: some of these parameters. Interesting practice is that something you
Speaker 2: do as well? That's something I do. I write myself
Speaker 2: a proposal. I mean, not a five page proposal job
Speaker 2: hazard is, you know, you tend to write long. No, no, no,
Speaker 2: I give myself maybe half a page. I tell myself why.
Speaker 2: So that
Speaker 2: I know why I've gone in. It's a discipline. It
Speaker 2: forces you to put your thoughts down on paper and
Speaker 2: it forces you to do the research. It forces you
Speaker 2: to do research and think through what you're doing because
Speaker 2: sometimes we have blind spots. But when you start writing
Speaker 2: it down, it becomes a bit more
Speaker 2: difficult to miss a blind spot. It forces you to
Speaker 2: commit to it. Right. Also, like, why you have to
Speaker 2: ask yourself why you're doing this, put pen to paper
Speaker 2: and then you realize, ok, something's missing here. I need
Speaker 2: to address that. Exactly. So, it's a good habit, practice
Speaker 2: a dog and something that the listeners can think about.
Speaker 2: Absolutely something I'm going to think about. I did. I mean,
Speaker 2: it's old school, right? You don't think about it because
Speaker 2: it's old school, but it works. There's a reason for it.
Speaker 2: Exactly. So, you know, when you do that, then you
Speaker 2: get a clearer picture of why literally a picture precisely.
Speaker 2: So I think that's important and that's something that a
Speaker 2: lot of people don't do because what they do is
Speaker 2: they see the investments in a modular fashion. Yes. So yeah.
Speaker 2: So when we talk about safe havens is really about
Speaker 2: protecting your downside. Yeah. So part of protecting your downside
Speaker 2: goes beyond just buying safe havens, but also making sure
Speaker 2: that you add an element of safety to your investment approach. OK.
Speaker 2: That's a fantastic tip. That's going to be my key
Speaker 2: takeaway from this conversation, not the fact that it's safe havens,
Speaker 2: but I joke. So aside from going through my drawer,
Speaker 2: counting my gold bracelets, checking on my Japanese saying, flipping
Speaker 2: through my bank accounts,
Speaker 2: where can I invest in safe haven assets? What platforms
Speaker 2: are available to me? Do? I need necessarily to treat
Speaker 2: them via a bank through a Robo advisor. I mean,
Speaker 2: there are gold etfs now as well. I'm sure there
Speaker 2: are currency etfs also to think about like, how do
Speaker 2: I go about doing this? Ok. I think you can
Speaker 2: do it through various platforms. Some of the things that
Speaker 2: you mentioned are the platforms that the listeners can think about.
Speaker 2: We had O CBC allow you to actually
Speaker 2: invest in gold through our digital app. And we've also
Speaker 2: got a precious metal account at CBC on our Robo
Speaker 2: Invest platform. And we're not the only ones. I mean,
Speaker 2: there are other banks that also offer solutions that allow
Speaker 2: you to invest in gold for those who want something
Speaker 2: that's more tradable. For example, the Spider F that's listed
Speaker 2: on the SGX, right? It's available both in sing dollars
Speaker 2: and US dollars.
Speaker 2: That's something that has become quite popular. So there are
Speaker 2: various options out there. Similarly, for currencies, you talked about
Speaker 2: a multi currency account or even putting your money into
Speaker 2: a savings account, foreign currency savings account, buying currencies on platforms, right?
Speaker 2: Non-bank platforms going through money changer, changing money, which is
Speaker 2: what I've done partly with my Japanese Yen because my
Speaker 2: plans are, you know, the next couple of years, my
Speaker 2: holiday destinations are going to be Japan.
Speaker 2: I've actually changed quite a bit of Japanese Yen in
Speaker 2: preparation because if I don't use it at least I
Speaker 2: hopefully get to benefit from price appreciation of the yen
Speaker 2: as well. Yeah, that's a good tip for me as well.
Speaker 2: I only have so many months to save up for Basu.
Speaker 2: Thanks so much for unpacking all of this, the world
Speaker 2: of safe haven investments with me here on the money
Speaker 2: talks podcast. You've been a great help. I'm gonna, I'm
Speaker 2: gonna write down my investment proposals now.
Speaker 2: Thanks for that tip and a big thank you to
Speaker 2: you too. Listener. If you like this episode, you got
Speaker 2: to show it, leave us a comment or a rating
Speaker 2: on wherever you get your podcasts. If you want to
Speaker 2: find us, we're streaming on Apple podcasts and Spotify as
Speaker 2: well as youtube. The team of Money Talks is made
Speaker 2: up of Joanne Chan, Tiffany, Christina Roberts. You win and
Speaker 2: I'm Andrea P.